Archive for the ‘repayment’ Category

The impression of a yawning gulf between two worlds was hammered home today.

On the one side we have reckless gamblers, known as bankers, again raking in cash and handsomely rewarding themselves, on the other there is a threat of extremely severe cuts in local services.

Add that to the high levels of unemployment and the collapsing infrastructure of the nation and I can only repeat again that we are in serious danger of becoming the new serfs to the new feudal lords.

This morning’s Financial Times carries a long report (Do-it-yourself warning as state cuts back) of forecasts by the most senior Local Authority professionals. So serious is the matter that we have a joint report from the Society of Local Authority Chief Executives, and the Chartered Institute for Public Finance and Accounting.

They expect a cut in local services by one third over the three years 2011, 12 and 13. With Alistair Darling forecasting government cuts of over an eighth one might wonder how George Osborne is going to ensure ‘we are all in this together’! If he becomes Chancellor…

The idea of bankers paying their fair share – any share – of the ‘fine mess they’ve gotten us into’ recedes more every day. They complain that they would not be able to hold onto the best staff otherwise. To which the question must be ‘Best for what?’.

“But there is undoubtedly going to be a need for individuals and families and communities to do more for themselves, along with the voluntary sector, rather than looking to the state as the provider of first resort,” comment our doughty professionals.

Bankers, of course, faced no such restrictions to save their bonuses. And, to make that possible, we are seeing the price we will have to pay for a very long time. Who says ‘the prices is worth it?’ Not those doing the paying.

For me this raises a very important question. Who is all this for?

We are dazzled with figures about how we must trade, we must find the cheapest labour, we must become efficient. But must we?

It certainly makes company balance sheets look better. But who is that for? Not for you and me. Does it matter how cheaply goods are imported if we are out of work and unable to buy them? If just having our refuse collected costs an arm and a leg – or if it is not going to be collected at all?

It raises many questions about how we organise our world; and many questions about what is important to us as people. Over the coming years those questions will be major discussion points.

We are offered figures which show green shoots of hope. Today’s double whammy from national and local government leave me feeling distinctly in depression.

This is a neat little survey of the field, but left me distinctly disturbed. Now I understood the origins of Microfinance to be affordable small loans to help the underprivileged in poor countries to start the process of lifting themselves, and so contributing to their nation.

Affordable to me describes the whole package. Small sums that are enough to purchase stock for the initial trading of a small business, or loans to households to supply needs. The repayments would be small and might not start for a while. And the interest rate would be very low.

In the UK this is not a new idea and was operated by the Midlands Tallymen, who loaned the money to buy clothing and domestic cottons and linens from sometime in the C19. They would lend about £10 at a time and seek repayments of about ten shillings (half a pound) a week for 21 weeks.

That is dear enough at 5% on a twenty week loan, an APR of about 12.5%, certainly not cheap for the time in question. But it dwarfs and pales beside the figure quoted by Harford from a study of a South African project with charges equivalent to 200%.

No wonder he says that the value of the system is questionable.

In Kenya a savings accunt paid no interest and charged ‘hefty’ fees for withdrawal. That just seems an activity run by sharks.

That is a killer charge; it makes no sense to me if its purpose is to help the less fortunate. But in my research over the banks across the world, and the profit seekers who treat no one with sympathy it is all too familar.

In analysing the new Lending Code I find that Microfinance has become a word for the banking community. But they define a micro-enterprise as a business employing fewer than 10 people and with a turnover or asset total approaching £2million.

That certainly seems small, but Micro?

Actually it is a European Union definition! This suggests some confusion of understanding about the idea, though the effect that the smallest businesses should be treated with more care and responsibility than the bigger ones is a positive approach to the learning curves faced by those developing them.

I wouldn’t want to discourage any of this, but I am sorry to see so much opportunism creeping in.

Perhaps it needs a while longer to settle down into a sound international system.

It is perhaps ungrateful of me to start with a gripe. But I do not like the idea of major lenders being involved with micro-finance. Somehow it seems to deny the very purpose of the idea. But perhaps I am more minded of the origins of micro-finance, in developing countries, to aid those needing small sums to start a truly small business.

However the code has the BBA Statement of Principles as Annex B. It is a pity, that the British BBA, quotes figures in Euros and not good British pounds in this.

First the principles make clear that the bank has an obligation to ensure clarity for the borrower, and that it should advise the customer to seek advice on the bank’s proposal. Certainly a desirable approach.

The obvious exchanges of information through the finance period are set out, and this makes for clarity. There may also be independent reviews of the micro-business – though without clarity about how the reviewer will be chosen.

While it can be painful where it happens the principles wisely state that any harsh realities need to be faced and acted upon. this can, of course, include closing the business. Facing it when the signs are clear will be better for the micro-finance borrower, I agree.

As a sort of mixed ‘we are on your side’ message there is also the statement promising no legal action if… essentially closing the business when advised. Again it looks quite harsh, but it does make better sense to ‘live to fight another day’.

The banks clearly reserve the right to confirm that appointing a receiver would be the right action, and I can’t see them arguing against it; I’m not sure what that provision is for, since it would be in the contracts anyway, I would have thought.

The complaints procedures are similar to the individual borrower’s and I will deal with that in a later blog here.

But there is particularly a requirement on the lender to enable moving an account to another bank.

Debt and mental health
This section of guidance is relevant to both personal and micro-enterprise customers.
173. The impacts of financial difficulty can be especially acute for customers with mental health problems. Subscribers should consider their processes and systems to ensure that they can be responsive to a customer in financial difficulties, from the point at which they are made aware of a mental health problem. [Reproduced with the kind permission of the British Banking Association – here]

The Lending Code is now part of the formal equipment of the Office of Fair Trading, and sits more certainly side by side with holding of Credit Licences and with such fair dealings rules as the Consumer Protection Regulations.

Monitoring remains with the Lending Standards Board [that was the Banking Code Standards Board], but penalising becomes a matter for the OFT.

This is why this is such an important advance. It is now a requirement for creditors and debt collectors to take into account mental problems where there are financial difficulties. This is already covered in the CPRs, under the guise of vulnerable debtors. Vulnerable includes the elderly and those without funds.

While the Debt and Mental Health section is by no means as definite as I would like, it is such a big strengthening of the position of debtors with such health problem that the wording is to be praised as improving the experience of such debtors.

I have just released this press release; as you see it is a matter of some seriousness

The new Lending Code, which replaces the credit and financial difficulties sections of the defunct Banking Code, is due to come into effect on November 1. Some nineteen short days away.

There is to be no public sight of these changes, nor any consultation process before these changes come into effect.

Specialist author Joseph Harris – Debt Control Man – has been trying to get sight of these changes since June. He has been told they will not be released until they are in effect on November 1 by Paul Ross, the man who is writing the new document for the British Bankers Association, in an email.

“This is a clear case of dictatorial behaviour,” declares Mr Harris. “It is a disgrace that no one concerned with the field, nor any debtor – whether defaulting or not – has any idea how the changes will affect them.

“Vince Cable was wrong when he said Gordon Brown had changed from Stalin to Mr Bean. On the basis of this secrecy and undemocratic behaviour he remains Stalin.”

Phone calls and emails to the FSA and the OFT result in classic Civil Service dropping the query into the new virtual filing bin.

“Even though there are many rules to help debtors negotiate the treacherous waters of finding the best way for their needs, too many creditors and debt collectors – including the biggest companies – do their best to sidestep them.

“Lack of a clear knowledge of what is happening among debtors and their advisors leaves these worst companies a window of opportunity to harass and bully particularly the poorest and most vulnerable debtors,” adds Mr Harris, author of Control Your Debt Crisis on Your Own Terms http://www.controlyourdebtcrisis.co.uk/book-cydc/cydc_Book_intro.shtml .,

“It is also a tragedy that the opportunity to include the requests of the Treasury Select Committee in 2005 and of the Money Advice Liaison Group has been lost.”

While most of the Banking Code is being operated as statutory Code of Practice directly by the FSA, the credit and financial difficulties sections move to the The Office of Fair Trading to sit beside the OFT’s duties controlling issue of Consumer and Business Credit Licences.

In trying to sort the changes out, particularly in how they affect defaulting debtors, I have been led a merry dance.

I think I have emailed or phoned or both, almost every player in this game of musical chairs.

Finally I remembered that the last time I needed to make sense of this area I got sense from the Banking Code Standards Board. So my thanks to them once again.

I have since spoken to others to try to get detail of how exactly the changes will take effect from November 1. That is pretty close for all those who will be affected, especially the helping organsiations like the CABs and Law Centres.

It seems that while most of the Banking Code disappears into the winding corridors of the Financial Services Authority, the parts dealing with lending move to the Office of Fair Trading – except they don’t.

The wording of the new Lending Code [possibly that is the title] is to be managed by the British Banking Association, which has always done it, and it will be monitored by the Standards Board, which has always done that!

And the OFT will, er, enforce fair treatment, and it has always done that!

So welcome to the new-old, different and unchanged system.

Well the changes have to be re-written, but it seems there will be little time for picking up any errors in wording or possible interpretation. And I understand nothing new will go in before 2011.

Not the advice of the Treasury Committee of 2005, nor that from the Money Advice Trust on behalf of MALG in 2007 – nor anyting else.

Every time I think I have reached the bottom of this government’s inanities over bailiffs I am apprised of further actions which make sense only if these people are in the pay of the financial casino.

Thanks again to the Zacchaeus 2000 Trust I have learned of the Bill introduced by Karen Buck M.P., (Labour for Regent’s Park and Kensington, North), a few days ago under the ten minute rule. It has gone now to second reading which is a triumph for her preparation work which has taken a year.

[Most often ten minute rule Bills are killed at birth!]

In her introductory remarks Ms Buck offers these points which are worth some thought by us all: Bailiffs (Repeals and Amendment) is the title of the Bill and it “… make requirements in respect of the use of force and forcible entry by bailiffs; to make provision for the reference to court of certain cases involving vulnerable clients; and for connected purposes.”

“… Debt and debt recovery action have become a reality for ever larger numbers… the arrival of a bailiff is, for many of those people, the ultimate trauma and humiliation… people have had heart attacks when the bailiffs have arrived. The mental and physical stress… is one of the worst things that will ever happen to them in their life.”

She points out that not all bailiffs fail to be as helpful as possible. But “… many.. are desperate and vulnerable people, and many are also victims of error. … even the actions of bailiffs who behave entirely reasonably… are disproportionate and excessive.”

“… it has become clear to me that we have got the balance wrong,… we need to review… We must certainly not, in any circumstances, think of escalating the powers available to bailiffs, and the Government should rethink their approach to regulation.” [my emphasis]

“… In my local authority alone, and in respect of just… council tax… more than 13,000 cases ended up in the hands of bailiffs over a three-year period.”

“What does it mean… It means fear and trauma for people, particularly children. I have heard of moving cases… children have refused to leave the house or have insisted on having the lights out at home because they are so frightened of a bailiff… seizing their television or computer.”

“… also means an escalation of the original debt, which simply compounds the problems that caused the financial crisis in the first place.”

“For one single parent with three children, one… disabled… (a) parking fine, about which I was making representations, had escalated from an original £60 to £700 by the time the bailiffs arrived.” [my emphasis]

In another “… two sets of bailiffs (were) chasing the same debt. Payments had been made to and acknowledged by the council, but did not then appear on the system.” [my emphasis] This lady wrote “… each party refers me to the other, the fees are ever increasing and.. threatening the removal of goods for the same amount.”

The Bill’s aims “.. are threefold. The power of forcible entry into a person’s home and the power for bailiffs even to use force against debtors are far too extreme to be given to civilian enforcement officers. The balance has been tilted too far against the householder’s right to be secure from trespass into their home. ” [my emphasis]

“… overturns a long-standing common law tradition,… in the Tribunals, Courts and Enforcement Act 2007… some p[owers] have not (yet) been brought into effect… such powers should be repealed.”

“… the power to enter domestic premises forcibly… for collection of criminal fines is already legal, and that too is creating appalling distress for many vulnerable households. Many… fines are levied on people on low incomes for offences such as the non-payment of TV licences, fare dodging and truancy.”

“… the issue here, too, is one of proportionality,… I also seek a statutory procedure requiring bailiffs to return cases involving vulnerable and impoverished debtors to the courts or the creditors, and powers to allow people subject to any bailiff action to apply to the courts for any bailiff warrant to be suspended… (this) is (currently) available only to people subject to county court bailiff warrants.”

“… case law, which holds that a distress warrant cannot be withdrawn once it has been issued. That directly contradicts the national standards for enforcement agents, which suggests a procedure enabling the bailiff to return cases of vulnerable fine defaulters to the court.”

“… disproportionate fines are being paid by benefit claimants and other low-income groups, intensifying the poverty that pushed many of them into debtY Finally, we need a statutory provision for bailiffs to accept ‘affordable payments’, with a definition of what that might mean in practice…”

“… I believe that they need greater protection, and above all, to be freed from the fear of the implementation of the excessively harsh powers held in reserve in the legislation.”

The Bill has six more stages; second and third reading in the Commons; first, second and third readings in the Lords; and signature by Her Majesty. It is only a pity that with this government tottering and the next election in any case but a year away the chances of it becoming law are slim.

But ‘good on yer’ Karen Black; you’re one we need back in the Commons. And keep it up Zacchaeus Trust; we need you.

I had earlier had the view that bailiffs were well contained by sensible limits. Thanks to The Times online I find this is not now so.

You may at times have thought me unreasonably hostile to this government; however I further view this as a little snide piece from a business dominated group.

Thanks to the Zacchaeus 2000 Trust the new measures are being fought vigorously and Jack Straw has already taken some action to mitigate the legislation. However, some measures which need to be understood remain.

Councils are already making more use of bailiffs, says The Times, to collect Council Tax arrears. Our ‘People’s’ ministers were going to extend bailiffs’ powers so they can use force when to seize goods in cases of civil debts.

We are indebted to Zacchaeus and its new lawyer, Joanna Kennedy, for forcing a halt to this return to the bad old days. Kennedy’s and the trust’s aim remains to roll back the legislation – Tribunals, Courts and Enforcement Act 2007 – ‘ “…and although ministers have said that they will not enact them, they remain on the statute book. So the Government could change its mind at any time. We’d like the provision to allow the use of force and effect forcible entry removed entirely.” ‘

Here! Here! Bailiffs still have a right to use force over unpaid criminal fines under the Domestic Violence, Crime and Victims Act 2004, such as for non-payment of a TV licence or motoring offence. For the past 400 years until that Act, entry to a person’s home had to be peaceful.

What a disgusting piece of legislation from a disgusting Government.

Quite incredibly the details of MoJ guidance to bailiffs on forcible entry appears to have been made a state secret!. These have been withheld “for reasons of the health and safety of bailiffs”. How, trust chairman Reverend Paul Nicolson, asks, “can we or the magistrates’ courts tell if bailiffs are keeping the rules if the rules are kept secret?”

Under a Freedom of Information request, a version of the guidance was released, with 15 of 30 pages redacted. An appeal to the Information Commissioner led to reissued guidance last autumn with different redactions — including some parts previously seen.

To put it mildly this is a business government. And a total betrayal of the founding of the Labour Party. That party was formed to fight the very excesses by business that Brown and his band are bringing back onto the statute book. It makes the Tories look positively socialist!

Explaining her new role Kennedy explains: “I had been a lawyer for 30 years and I enjoyed it, but increasingly I found the amorality of the commercial legal process frustrating and I wanted to do something a bit more worthwhile. A lot of it,” she added, “was making the rich richer and, as lawyers, becoming rich yourself.”

Welcome to the world of defending the under-privileged Joanna; more strength to your elbow and those of Rev Nicholson and Zacchaeus. We certainly need you.

I do not often discuss the wider economic picture here. This is because there is enough to discuss on issues of how to control one’s own affairs.

But I do feel that this is one of those times that wider events are going to impact on exactly that, and quite seriously.

My view of the direction of the British and of the world economy is extremely bleak. For me this is no recent conversion. For as long as I can remember I found the idea of exponential growth in a finite world merely disaster waiting its opportunity.

It is my belief that now the changes will be quite dramatic; if they are understood then there can be an orderly and planned move to the changes.

But in the interim you and I need our wits about us. And the first move is the opposite of the ‘wisdom’ from official circles. You need your cash more than some over-exposed company. You have no duty to spend. Rather you have a duty to think how you will manage in the next years if there is a drop in your income.

And – unless you are one of the few lucky ones – your income will not rise and is most likely to fall. This will look acceptable as deflation operates for a few years. But the actions of governments, and the continued thinking – that if you are in debt you should borrow your way out – promises a massive inflation following on from that.

In terms of debts and repayment, my advice is to is to ensure you have kept in your own pocket everything you possibly can; and I give advice on that elsewhere. While it may feel like a good idea to repay debt as fast as you can it may not be your best approach at this time.

In view of the difficulties ahead I may write more on the wider picture, but for now please think very carefully when faced with any expenditure – including repayments.

For a moment I think we all believed the Government had actually wanted to help mortgagees. We should all have known better.

And talking of Better, it seems outside the financial casino no one gets real help.

Anyway, I know mortgages are not my speciality, but the fading, like the fairy dust it was, of the substantive part of the promise was remarkable.

First it seemed homeowners were going to be really, really helped with a six month – something or other with the banks holding fire on giving defaulters a hard time. Though I was never clear if it was a moratorium, a halt to rude phone calls, or just a six month delay before the repossession papers get served – any way eight banks said they’d do it.

That’s our curate’s egg of owned, part owned, and almost owned banks. Nationalised, as any self respecting linguist might say!

Then it seemed that homeowners at risk of having problems on their payments were going to be really helped by some long arrangement to give them breathings space. And that turns out ot be a mouse’s squeak of a ‘part’-deferral of interest payments for up to two years.

Which might be fine for those with interest only payment policies, but may be a tiny sum for many others.

And then it seems only one in ten would be helped at all by the final proposals…

Smoke and mirrors anyone?

Still it has all successfully hidden the laws for totally random stop and prove identity to be given to the police. And that one about lie detector tests for benefit claimants.

Er… will that be some miracle test that is reliable that we have never heard about, and will the identity proof turn out to be only these dodgy identity cards that Gordon loves so much?

Ah well, you don’t want to know about that anyway. But make sure you read the small print if you feel you would like some of this help with your mortgage.

Unless you want billions, in which case Gordon will mortgage you and I and several generations of our dependents, I suspect this tuppenny-halfp’ny aid on mortgages will come with chains…